Second time lucky for Ireland’s credit rating?

Irish policymakers will hope the country can garner a second credit rating upgrade from Moody's Investors Service this Friday, after regaining its coveted investment grade status in January.

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Sovereign credit ratings evaluate the likeliness of a state defaulting on its debt, and Ireland was the first of the crisis-hit euro zone economies to ditch its "junk" rating.

Some financial firms believe Ireland remains under-rated, with Brown Brothers Harriman (BBH), for instance, giving Ireland an A- rating. This is above the three major ratings agencies: Moody's currently rates Ireland Baa3 (equivalent to BBB-), while Standard & Poor's and Fitch Ratings rate it BBB plus.

"Moody's will review Ireland at the end of this week and there is a reasonably good chance that it revised its rating higher again," said Marc Chandler, the head of currency strategy at BBH, in a research note.

"It is possible Moody's upgrades Ireland by two notches, but typically, as recoveries are slower than the downside of a credit cycle, rating agencies tend not to upgrade by two steps. However, our point is that the direction is there."

Fans of the Irish recovery story point to strong data releases. Figures for March showed industrial production was up 10.2 percent on the same period a year before, while retail sales were up 8.8 percent.

While Ireland's purchasing managers' index (PMI) reading of 60.8 this month was among the highest of any country in the euro zone, and showed economic activity in the country had increased at the fastest rate in almost eight years.

The data has boosted Irish markets, with the yield on Ireland's benchmark 10-year government bond falling below its U.K. Gilt-equivalent last week. This was despite profit-taking in other peripheral euro zone markets, after European Central Bank President Mario Draghi indicated that further easing measures were imminent.

Irish yields continued to fall this week, closing in on yields for equivalent "safe-haven" U.S. Treasurys and German Bunds. Meanwhile, the ISEQ, the Irish benchmark stock index, has gained over 4 percent this year.

But despite the market optimism, there are some doubts as to whether Moody's will reward Ireland with another upgrade so soon after its last.

Dermot O'Leary, chief economist of capital markets at Goodbody in Dublin, agreed another upgrade was justified, but said one was unlikely until later in the year.

"Having upgraded the sovereign at the beginning of the year, Moody's is likely to wait for further information on the trajectory of the recovery, progress on the budget deficit reduction efforts and the developments in the banking system," he told CNBC via email.

O'Leary was more upbeat on the prospects for Ireland's banks, which are likely to be reviewed by Moody's shortly after its sovereign update.

"We do believe that the agency will upgrade the banks' ratings over the coming weeks, given that stress test parameters, released recently, should pose little problems," said O'Leary.

Moody's will also review Poland's credit rating on Friday. Rival agency Standard & Poor's will review Romania on the same day and Fitch Ratings will publish an update on Belgium and Czech Republic.